Why is my tax refund different? In the United States the IRS may have corrected your return, or an agency may have taken part of the refund. In Canada the notice of assessment may adjust your figures or apply the refund to a debt. In India processing may adjust the return or limit your credit to Form 26AS.
Why is my tax refund different? The common reasons
| Reason | United States (2025 return) | Canada (2025 return) | India (FY 2025-26) |
|---|---|---|---|
| Agency corrects the return | Math errors, credits or deductions you do not qualify for, prior-year tax owed, underpaid estimated tax | Notice of assessment adjusts figures using your return and what the CRA already holds | Adjustment for arithmetical error, an incorrect claim apparent from the return, or a late-return limit |
| Offset against a debt | Child support, federal non-tax debts, state income tax, some state unemployment debts | Amounts owed, family-support garnishment, federal or provincial debts such as student loans | Set-off against an outstanding demand, after written notice |
| Notice | IRS notice; Treasury's Bureau of the Fiscal Service for offsets | Notice of assessment or reassessment | Intimation on the e-filing portal |
| Time to respond | By the date on the notice | 90 days to object to a reassessment | 30 days (2025 Act) |
What changes a US refund?
Besides the table, the earned income credit and additional child tax credit hold the whole refund until mid-February, and a Form 8888 split arrives in parts. The 2025 law also changed tax year 2025: new Schedule 1-A deductions (tips, overtime, car-loan interest, seniors), a higher standard deduction and a $2,200 Child Tax Credit that needs valid SSNs for you and each child. Most of it applies from January 1, 2025, so payroll withholding often missed it.
An offset notice shows the original refund, the offset and the agency. The IRS cannot see those details, so call only if the original refund on it differs from your return. On a joint return with a spouse's debt, ask about injured spouse relief. Dispute a CP12 by the notice date or lose formal appeal rights.
What to do. Read the notice, compare it with your return, reply on time, then rerun the IRS Tax Withholding Estimator and file a new W-4. See what to do when you get an IRS notice.
What changes a Canadian refund?
The notice of assessment explains the changes and lists your RRSP limit, Home Buyers' Plan and Lifelong Learning Plan balances and FHSA room. Correct your own return with Change my return (about 2 weeks), ReFILE or Form T1-ADJ by mail (about 19 weeks); the CRA does not refund adjustment requests more than 10 calendar years after year-end.
Benefit overpayments can be recovered from tax refunds or Canada Groceries and Essentials Benefit payments, but the Canada child benefit is never applied to unrelated debts. See notice of assessment and reassessment.
What changes an Indian refund?
The Income-tax Act, 2025 (tax year 2026-27 onward) lists processing adjustments: arithmetical error, a claim incorrect on the face of the return, inconsistency with prior-year data, losses claimed on a late return and audit-report disallowances. A return for FY 2025-26 falls under the 1961 Act, whose current wording we did not re-check, so your Chartered Accountant confirms.
The credit you claim is limited to Form 26AS. If TDS is missing, ask the deductor to correct its TDS return, then revise the return or request rectification after an intimation. A late return loses most loss carry-forwards and some deductions, and adds interest and a fee. Senior-citizen slabs are for residents only. See intimation and rectification and AIS and Form 26AS.
Mistakes and cross-border traps
- Calling before the letter arrives, missing the CP12 date, or claiming TDS that Form 26AS does not show.
- Canada pays direct deposit only to Canadian accounts; otherwise a cheque goes to the address on file. Non-residents in countries that reject Canadian cheques can ask for a wire.
- India pays only to a pre-validated account (savings, current, cash credit, overdraft or NRO; NRE is not listed) with PAN linked to Aadhaar. Validation takes 10 to 12 working days.
- The United States: we found no IRS statement on foreign accounts, so keep a U.S. account open.
- A refund that arrives after you claimed a foreign tax credit can change the credit; see foreign tax credits across three countries.
A worked example (invented numbers)
Dev is a U.S. citizen in Mississauga and files a 2025 Form 1040 and a 2025 T1. He expects $1,800 from the IRS, but a CP12 says the IRS changed it to $1,450 after disallowing a $350 credit, and he replies by the notice date. He expects CAD 2,400 from the CRA, but the notice shows CAD 2,150 because the CRA applied CAD 250 to a student-loan debt. He has 90 days to object to a reassessment.
What we do
On the U.S. side we review notices, reply to the IRS, prepare Form 1040-X where needed and set withholding. We coordinate with your Canadian CPA and Indian Chartered Accountant, who deal with the CRA and Indian authorities; we do not prepare Canadian or Indian returns. See IRS and state tax representation and the tax questions hub.
Frequently asked questions
Why was my refund offset?
An agency applied it to a debt. In the U.S. the Treasury notice names the agency.
Why is my Indian refund smaller than my return shows?
Often because the credit is limited to Form 26AS. Compare the two and ask the deductor to correct any gap.
Did the 2025 law change my US refund?
Possibly. The IRS reported an average refund of $3,276 through May 8, 2026 against $2,939 a year earlier, but your result depends on your own facts.
Where did my refund go if I moved abroad?
Canada and India pay only into their own accounts; see the traps above and where is my tax refund.
Official sources
- IRS: Reduced refund
- IRS: Taxpayers could see a change in their 2025 tax bill or refund
- CRA: Tax refunds
- CRA: Direct deposit for individuals
- CRA: Notice of assessment and notice of reassessment
- Government of India: Income-tax Act, 2025 (Gazette copy)
- Income Tax Department of India: Tax credit mismatch FAQs
- Income Tax Department of India: My bank account FAQs
This page summarizes public guidance in plain language. If anything here differs from the official source, the official source controls.
General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.